CMC cans plans for brokerage sale

CMC Markets’ new global boss,
Peter Cruddas
, has scuttled plans to sell the company’s Australian stockbroking business while relocating the group’s Singapore dealing room back to Sydney this year.

Mr Cruddas, who in January took back the reins at the contracts-for-difference provider he founded in 1989, said CMC planned to establish a Sydney trading floor where stockbroking and CFD dealers will work under one dealing operation.

“The short answer is, when I came back into the business in January this year as chief executive, I reversed the decision [to sell the stockbroking arm]," Mr Cruddas said.

“The big decision for me is to relocate the trading room, get back the strategy of having a proper full service trading company in Australia," he said.

Former CMC Australia chief executive
Louis Cooper
first flagged plans to sell its stockbroking arm last October. The sale would allow the company to concentrate purely on its CFD business, he said at the time.

The strategy is now moot as Mr Cruddas forges ahead with plans to ­create “one big trading floor" in Sydney, which encompasses staff manning the stockbroking, CFDs and foreign­exchange desks among other services.

Matthew Lewis
, CMC’s Singapore-based head of trading, will return to Sydney in July along with six to 10 other key personnel as Mr Cruddas’s plans take effect.

CMC Markets Stockbroking, which was formed after the CFD provider bought Andrew West & Co in 2007, is the only business of its kind across the CMC group.

Related Quotes

Company Profile

CMC never officially disclosed how much it paid for Andrew West, but sources say the company forked out north of $50 million for the broker just before the global financial crisis.

Sources say CMC was eyeing bids of north of $10 million during the recent sale process.

Sydney-based brokers
BBY
and
Patersons Securities
were thought to have run a ruler over the unit, which also attracted attention from offshore-based players.

Several offers tabled were said to have come in well under $10 million, as the broking industry felt the pressure of soft trading volumes and commissions.

Broking group
PhillipCapital
was one of the parties approached by CMC. PhillipCapital Australia boss
Jonathan Buckley
said the company looked at the division, but did not table a bid because PhillipCapital had an existing technology platform and was concentrating on boosting its adviser numbers.

One bidder who declined to be named said CMC’s price expectations were unrealistic and the timetable for the sale appeared rushed.

But Mr Cruddas argued that “if we wanted to sell the stockbroking [business], we could have sold it".

He acknowledged that the group “wouldn’t have got what we paid for it", but that was because ­business valuations across the board were down.

CMC’s plan for its Australian business also comes as the corporate regulator increases its scrutiny of companies across the financial services sector, including CFD providers.

Last week, the Australian Securities and Investments Commission slapped an enforceable undertaking on
City Index Australia
for deficient client money-handling practices.

City Index forked out $13,200 in fines last October after two infringement notices from ASIC. This month, online share-trading platform Halifax Investment Services also received an enforceable undertaking from ASIC after a review found flaws in the group’s risk management and compliance framework.